More on IBM and the midmarket

That quest continued at this week’s IBM PartnerWorld Leadership Conference 2011 here, where IBM unveiled new initiatives around business analytics and cloud computing geared to help IBM partners move the company’s hardware, software and services into midmarket companies.

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Still, it’s unclear how much traction it’s gotten in companies with up to 1,000 employees. IBM does not break out revenues based on market segment.

Attendee Ray Scardelli, vice president of sales and marketing for Micro Strategies Inc. in Denville, N.J., and an IBM and Microsoft partner, said he has seen real progress from Big Blue when it comes to medium-sized businesses. He is particularly impressed with the capabilities and packaging of IBM’s Storwize V-7000 storage, which helped his company win business that otherwise would have gone to Dell or Hewlett-Packard and their affiliated partners.

Micro Strategies has deployed both V7000 storage and new IBM Power systems servers in its technology solutions centers for customers to evaluate.

“We can demo disaster recovery, global mirroring -- technologies that companies of this size might never have seen before,” Scardelli said. “IBM’s new products allow us to go in against competitors and also to have a completely different discussion with the customer around security and content management that we didn’t have before.”

Still, for the many midmarket (and smaller) companies, IBM is not the go-to provider of IT.

“When you talk to midmarket companies, there’s more discussion around HP and Dell than IBM [on the hardware side], but that’s anecdotal,” said Daniel Kusnetzky, analyst and founder of the Kusnetzky Group LLC.

Money where its mouth is

Likewise, when it comes to server software and middleware, most midmarket companies are likely to default to Microsoft. But IBM clearly hopes to change all that, offering partners more incentives for competitive wins against rivals and higher margins in strategic areas.

Fred Cuen, senior vice president and general manager for Avnet Technology Solutions’ IBM Solutions group, said IBM has been smart about incenting its VARs to displace other technology providers.

Software resellers get 10 points of margin for finding an opportunity, another 10 points if they resell and, if they have Cloud Computing authorization, they get another 15 points atop the normal discount, said Dave Mitchell, IBM’s director of strategy and emerging business for ISV and developer relations. That’s a pretty attractive margin.

And IBM execs said the right things about the need for an army of profitable partners implementing IBM’s stuff.

IBM CEO Sam Palmisano said the key to partner viability is real value that goes way beyond providing the lowest-cost solution. “You can differentiate yourself by working with us … and [you] can improve profitability, margins and cash flows. If you don’t, you won’t be here in 2015,” Palmisano told some 1,500 partners today.

Steve Mills, IBM’s software chief, said IBM will do its best to reward its truest, bluest partners. “We are maniacally focused on giving [our best partners] the best margin. In return, we expect them to produce the best outcome for our customers,” said Mills, senior vice president of IBM’s software and systems group.

The advent of cloud computing may help enterprise players, which have many of the technology pieces needed to build and maintain infrastructure, gain an entry into smaller customers, provided they price them right.

“There are a lot of inexpensive ‘good enough’ cloud-based services,” that these companies could use, said Peter O’Kelly, founder of Andover, Mass.-based researcher O’Kelly Associates. That means big enterprise IT companies, such as Oracle and IBM have to do more than build the technology; they have to price it so it’s palatable in smaller doses.

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